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Amazon is discounting ebooks, whenever it’s allowed to, unlike Apple

Some really silly journalism covering the ebook marketplace today. It starts with this really bad, no good article in the New York Times by David Streitfeld. The headline gets off to a completely wrong start — “Little Sign of predicted E-Book Price War” — and it goes down hill from there, as Streitfeld asserts there was going to be a “ferocious price war over ebooks.” Who was ever saying that? Of course, it was the made-up nightmare scenario that publishers were screaming about after they got sued for illegally conspiring to raise ebook prices. Streitfeld never explains that and actively seeks to mislead the reader, writing those expectations were “fueled by Amazon.” It’s a bad set-up that only gets worse.

Next, he asserts that prices have “selectively fallen but not as broadly or as drastically as anticipated.” No data, not a shred, is offered to back up this bold assertion, not even the usual misleading average price of all best-sellers publishers have sometimes cited in the past (an average which included all the sales of 99 cent independently published ebooks). Even a brief look at Amazon’s prices compared with the high price leader, Apple, makes it pretty obvious that a ton of discounting is occurring. It is limited because two of the big six publishers are still banning discounts and another, Penguin, just settled and is not yet allowing discounts, either. But on ebooks where Amazon can discount, it is doing so to the tune of 15% or more.

Compare, for example, ebook prices of the New York Times fiction best-seller list on Amazon and Apple. On four of the top 10, both carry the ebooks at $12.99. And, no surprise, in all four cases the publishers are still banning all discounting. Another older book is priced at $9.99 on both and, again, discounting is banned. On the other five, Amazon is discounting every single one, with the average price $10.93 versus $12.19 for Apple. It’s the same if you go deeper down the list or look at non-fiction.

The biggest laugh-out-loud line comes next:

“The $10 floor that publishers fought so hard to maintain for popular new novels is largely intact.”

See the old switcheroo there? Publishers hated the $10 price — the whole point of their illegal, price fixing scheme was to kill the $10 price. They weren’t trying to maintain a $10 floor — they were trying to push the “floor” up to at least $13 to $15. And that effort has failed. Amazon itself wasn’t trying to get below $10 for best sellers. In fact, even before the illegal price fixing, Amazon often priced best sellers between $11 and $12, just like it’s doing now. Jeff Bezos was going around back in 2009 and saying he intended to make a profit on ebooks as a stand alone business. And that’s right back where Amazon is pricing. Not to mention that we still don’t have a true free market for ebooks as even publishers forced to allow some price cutting retain the ability to limit the amount of overall discounting. Also left out of this narrative is the massive growth of independently published ebooks at prices well below $10. The price fixing conspiracy certainly fed the growth of this part of the market and gave Bezos plenty of cheap offerings for Amazon customers looking for bargains. That wasn’t true back when the Kindle first started.

Streitfeld then picks the one book on the best seller list that’s discounted the least by Amazon as his example. Prices of the other discountable titles are all cut by more. Lame. My favorite example, if we’re going to cherry pick, is JK Rowling’s new novel, A Casual Vacancy, which the publisher was selling for $18 as an ebook, now cut to $12.74 by Amazon.

Then come a couple of wacky theories to explain the lack of discounting, which obviously have to be pretty wacky since they are meant to explain a non-existent phenomenon. It’s the slow down in ebook buying growth rates. It’s the demise of Borders (a true WTF). It’s Amazon holding back. Blah, blah, blah.

I love the next bit where Streitfeld cites an ebook market forecast from two years ago as “typically ebullient.” It’s James McQuivey calling for $2.8 billion of ebook sales in 2015. Crazy? Insane? Hmm, maybe right on. Ebook sales last year hit $2.1 billion and up some 34 percent this year, according to Streitfeld, thus reaching — wait for it — $2.8 billion.

The finish is, of course, the most wrong: “this might be as cheap as ebooks will ever be.” That’s pretty unlikely given that Penguin is about to allow discounting again and Macmillan is being prosecuted in court for its recalcitrance.

A second, slightly better piece from Laura Hazard Owen needs a few corrections, too. She buys into the data-free assertion that prices haven’t fallen and the headline is off-base. But she’s correct to point out that not all ebooks were sold at $9.99 before the wave of price fixing in 2010 — though I’m pretty sure she has previously gone along with publishers assertions that Amazon cut everything to $9.99 in the bad, old days (I’ll have to double-check). And she explains that Amazon’s ability to discount now is still limited, as I explained above.

Ironically, it’s the element of competition that she seems to get wrong. Apple isn’t discounting to match Amazon. It’s sticking with high prices. So whereas when Amazon was the only major player, it used $9.99 as a kind of promotional advertising, a psychological sweet spot, now it has a simpler task of undercutting the actual prices of the competition. No need for psychology, there’s a whole ebook marketplace consumers can see. And in the new market where Apple likes to sell for at least $13 when it can, a discount to $11 looks pretty enticing.

But Owen doesn’t get it as she writes: ” These retailers have all shown themselves willing to match Amazon’s price drops on ebooks. The prices aren’t always exactly the same across stores, but they are at least close enough that there is little incentive to switch retailers if you’re already using a platform you like.”

That’s the chuckler in her piece. Prices are not that close. And there’s less platform lock in than ever — it’s easy to switch around. Amazon offers free ereading software for almost any platform including the iPad, iPhone and Mac. Ironically, it seems to be the higher-priced competition that’s having the biggest impact on Amazon’s pricing, creating a price umbrella that has eased the pressure to price at $9.99.

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Thanks for stopping by GravitationalPull. Since mid-2013, I've taken a job as senior tech reporter for Yahoo Finance, so I won't be writing new posts here anymore. Check out my current stuff on my YF author page>.